One perspective on the factors that brought down Fannie Mae (and Freddie Mac) is found in the 2014 book, "Mortgage Wars," written by former Fannie Mae CFO Tim Howard. Howard's blind spot, even though his academic training was in economics, is that he did not understand the power of credit-fueled, speculation driven land markets. Rising land prices during the late 1990s and onward to 2008 resulted in a greater share of mortgage financing going to highly volatile land prices rather than to the financing of actual housing. The way to protect the finance system from itself, and to protect taxpayers going forward, would be to limit mortgage financing provided by any government-backed or government-insured entity to the depreciated value of the actual property improvement. Buyers of property would be required to bring sufficient cash to the table to pay cash for the land component of the transaction, or acquire the funds from another lending entity which would hold a second mortgage lien on the property. The interest rate on the land purchase would surely be higher, but the risk would be held by shareholders of the second mortgage lenders.
You should post your theory on Mr. Howard's blog. I'd love to hear his response. I would find it difficult to believe Mr. Howard doesn't have the knowledge and experience to clarify whatever it is you may think he may not have understood. www.HowardOnMortgageFinance.com
1. Fannie Mae and Freddie Mac are NOT government agencies! Government agencies don't trade on the stock exchange!!! 2. Fannie and Freddie did not need "bailed out". This is not an opinion, it is a fact. 3. This video is today, August 2017, a discredit to the Wharton School.
Wow.... here it is 2016... and now 2019... the 'brilliant' idea was to take two shareholder owned companies and make them "Mutuals"... owned by the TBTF? What's in your wallet? Credit-risk transfers? Yep, they go to Wall Street, too. Just examine the small credit losses at the GSEs. Simple to have a nice bullet-proof balance sheet and move on... the companies were fine and are certainly fine now. Sorry, it didn't pan out for your team.
One perspective on the factors that brought down Fannie Mae (and Freddie Mac) is found in the 2014 book, "Mortgage Wars," written by former Fannie Mae CFO Tim Howard. Howard's blind spot, even though his academic training was in economics, is that he did not understand the power of credit-fueled, speculation driven land markets. Rising land prices during the late 1990s and onward to 2008 resulted in a greater share of mortgage financing going to highly volatile land prices rather than to the financing of actual housing. The way to protect the finance system from itself, and to protect taxpayers going forward, would be to limit mortgage financing provided by any government-backed or government-insured entity to the depreciated value of the actual property improvement. Buyers of property would be required to bring sufficient cash to the table to pay cash for the land component of the transaction, or acquire the funds from another lending entity which would hold a second mortgage lien on the property. The interest rate on the land purchase would surely be higher, but the risk would be held by shareholders of the second mortgage lenders.
You should post your theory on Mr. Howard's blog. I'd love to hear his response. I would find it difficult to believe Mr. Howard doesn't have the knowledge and experience to clarify whatever it is you may think he may not have understood.
www.HowardOnMortgageFinance.com
1. Fannie Mae and Freddie Mac are NOT government agencies! Government agencies don't trade on the stock exchange!!!
2. Fannie and Freddie did not need "bailed out". This is not an opinion, it is a fact.
3. This video is today, August 2017, a discredit to the Wharton School.
Wow.... here it is 2016... and now 2019... the 'brilliant' idea was to take two shareholder owned companies and make them "Mutuals"... owned by the TBTF? What's in your wallet?
Credit-risk transfers? Yep, they go to Wall Street, too.
Just examine the small credit losses at the GSEs. Simple to have a nice bullet-proof balance sheet and move on... the companies were fine and are certainly fine now.
Sorry, it didn't pan out for your team.